Category Archives: Blog

Trade Sanctions Enforcement Update: Circumventing U.S. Trade Sanctions – Multi-national Aerospace Company Agrees to $21 Million Forfeiture

Fokker Services B.V. agreed to a $21 million civil forfeiture to OFAC and the Department of Commerce’s Bureau of Industry and Security for trade sanction violations for 1,112 alleged violations of the Iranian Transactions and Sanctions Regulations and 41 alleged violations of the Sudanese Sanctions Regulations with a U.S. nexus from 2005 through 2010.  This illustrates that any company, foreign or domestic, doing or planning to do business with entities or countries subject to U.S. trade sanctions – such as the Russian Federation – should seek guidance regarding compliance from counsel such as Marks & Sokolov.

Fokker Services used a number of schemes to evade U.S. sanctions and export laws describing them as “work-arounds.”  Examples include deliberately choosing repairs shops that would not request end-user certificates; withholding aircraft tail numbers to U.S.-based repair shops, providing false tail numbers to U.S. and U.K. companies, and stating that the parts submitted for repair by U.S.-repair shops were to be used as “stock” parts.  On one occasion, Fokker Services provided a U.S. aerospace company with a work order that falsely represented that the aircraft part belonged to an airplane owned by a Portuguese airline when, in reality, the part actually belonged to an Iran Air aircraft.  The U.S. aerospace company fixed the part and returned it to Fokker Services, who then shipped the part to Iran.

Fokker Services voluntarily self-disclosed this matter to OFAC which determined the alleged violations constitute an egregious case.  The settlement amount reflects OFAC’s determination that Fokker Services:

  • Engaged in willful and reckless alleged violations of U.S. law;
  • Knew that it was shipping U.S.-origin parts to customers in Iran and Sudan;
  • Caused significant harm to the objectives of OFAC’s sanctions programs given;
  • Is a sophisticated and experienced aerospace services provider;
  • Had no formal OFAC compliance program in place;
  • Did not institute sufficient controls to stop conduct upon discovery of violations;
  • Had no OFAC sanctions history in the five years preceding;
  • Had adopted new and more effective internal controls since launching internal investigation;
  • Provided substantial cooperation during the investigation.

Marks & Sokolov attorneys can assist with compliance by providing:

–          A review of contracts, including an examination of parties and their beneficial owners;

–          Determination whether the sanctions apply and prohibit contract performance;

–          Advice regarding potential liability to contract parties;

–          Advice regarding notification of termination of contracts and the disposition of deposits;

–          Advice about possible defenses against liability such as justified non-performance due to force majeure circumstances and regulatory prohibition.

Marks & Sokolov, LLC has extensive experience representing multinational clients in the United States and Russia.  For more information please contact, in the United States:  Bruce Marks (marks@mslegal.com) or Thomas Sullivan (tsullivan@mslegal.com) at (215) 569-8901; or in Russia, Sergey Sokolov (ssokolov@mslegal.com) or Derek Bloom (dbloom@mslegal.com) at +7-495-626-0606.

Business In Russia In Times of Crisis: Do You Know With Whom You Do Business? – Executive Orders 13660, 13661 and 13662 and Revocation of Export Licenses

Business In Russia In Times of Crisis: Do You Know With Whom You Do Business? – Executive Orders 13660, 13661 and 13662 and Revocation of Export Licenses

 

In response to the situation in Ukraine, the President of the United States has issued a series of executive orders imposing sanctions on Russian government officials and members of the inner circle in order to pressure the Russian government to alter its policies toward Ukraine.  Americans may not deal with sanctioned persons and must take measures to ensure compliance with U.S. law.

Ukraine I: On March 6, 2014, President Obama issued Executive Order (“E.O. 13660”) declaring a national emergency and authorizing the imposition of sanctions upon individuals involved in: (a) undermining the democratic processes or institutions of Ukraine; (b) threatening the peace security, stability, sovereignty or territorial integrity of Ukraine; (c) misappropriating state assets of Ukraine; or (d) asserting government authority without authorization from the Ukraine government.

This first round sanction authorized blocking property and interests in property of persons to be designated and added to the Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) Specially Designated Nationals (“SDN”) List.  Blocked property includes property, or interests in property, of any persons owned, controlled or acting for any SDN.  OFAC considers a person controlled by an SDN if, among other factual scenarios, the SDN has a 50% or more ownership interest in the person.  Such a person is blocked even if the person is not specifically listed on the SDN list.  Blocking immediately imposes an across-the-board prohibition against transfers or dealings of any kind with regard to the property by “United States persons.”  Entry into the United States of blocked persons has also been suspended.

Ukraine 2: On March 16, 2014, President Obama issued Executive Order (“E.O. 13661”) blocking property of seven listed Russian government officials and authorizing OFAC to add to the SDN list, Russian government officials and any individual or entity that is owned or controlled by, or provided material or other support to, a senior Russian government official.

On March 17, 2014, pursuant to E.O. 13660, OFAC added four persons to the SDN list, including Crimean separatists and ousted Ukrainian President Viktor Yanukovych.

Ukraine 3: On March 20, 2014, President Obama issued Executive Order (“E.O. 13662”) authorizing sanctions to target sectors of the Russian economy, such as financial services, energy, metals and mining, engineering, and defense and related materiel, as to be determined by the Secretary of Treasury.

On March 20, 2014, pursuant to E.O. 13661, OFAC added to the SDN list, sixteen Russian government officials and members of the inner circle that support them.  In addition, four persons plus Bank Rossiya were added to the SDN list for providing material support to Russian government officials.

On April 11, 2014, pursuant to E.O. 13660, OFAC added seven Crimean separatist leaders, a former Ukrainian official and a Crimea-based gas company to the SDN list.  On April 28, 2014, pursuant to E.O. 13661, OFAC added to the SDN list, seven Russian government officials, including two key members of Russian leadership’s inner circle, plus seventeen entities because they are owned or controlled by persons whose property and interests in property are blocked pursuant to E.O. 13661.

In addition, on April 28, 2014, the U.S. Department of Commerce’s Bureau of Industry and Security announced expansion of export restrictions on items subject to the Export Administration Regulations, and that it will deny pending applications for licenses to export or re-export any high technology items to Russia or occupied Crimea that contribute to Russia’s military capabilities. In addition, the Commerce Department is taking actions to revoke any existing export licenses which meet these conditions.

Any U.S. company doing or planning to do business with Russian companies should seek guidance regarding compliance with these Executive Orders which apply to U.S. companies, as well as foreign companies which they control, and all U.S. citizens.  Marks & Sokolov attorneys can assist with compliance by providing:

–          A review of contracts with Russian parties, including an examination of Russian contract parties and their beneficial owners;

–          Determination whether the sanctions apply and prohibit contract performance;

–          Advice regarding potential liability to contract parties and the US Department of the Treasury,

–          Advice regarding notification of termination of contracts and the disposition of deposits;

–          Advice about possible defenses against liability such as justified non-performance due to force majeure circumstances and regulatory prohibition.

Marks & Sokolov, LLC has extensive experience representing multinational clients in the United States and Russia.  For more information please contact, in the United States:  Bruce Marks (marks@mslegal.com) or Thomas Sullivan (tsullivan@mslegal.com) at (215) 569-8901; or in Russia, Sergey Sokolov (ssokolov@mslegal.com) or Derek Bloom (dbloom@mslegal.com) at +7-495-626-0606.

“Doing business with the BRICS” Conference, Washington DC

Tom Sullivan was a speaker at the 2nd annual “Doing business with the BRICS” Conference held on May 13, 2014 in Washington, D.C.

The program was sponsored by The Eurasia Center along with Embassy of the Russian Federation and Diplomatic missions of Brazil, India, China and South Africa.

Tom discussed the recent situation in Ukraine and series of executive orders signed by President Obama imposing sanctions on Russian government officials and members of the inner circle in order to pressure the Russian government to alter its policies toward Ukraine.

See Agenda

See handout materials

Business In Russia In Times of Crisis: Do You Know With Whom You Do Business? – Executive Orders 13660 and 13661

logo transparent

On March 6, 2014, the President of the United States issued Executive Order (“E.O. 13660”) authorizing sanctions on individuals and entities responsible for Russian activities related to Ukraine.  On March 16, 2014, the President issued Executive Order (“E.O. 13661”) authorizing sanctions on, among others, officials of the Russian Government and any individual or entity that is owned or controlled by, that has acted for or on behalf of, or that has provided material or other support to, certain Russian government officials.  On March 20, 2014, the President expanded the scope of E.O. 13660 to authorize sanctions which prohibit doing business with certain Russian officials, business persons and a Russian bank.

Any U.S. company doing or planning to do business with Russian companies should seek guidance regarding compliance with these Executive Orders which apply to U.S. companies, as well as foreign companies which they control, and all U.S. citizens.  Marks & Sokolov attorneys can assist with compliance by providing:

–          A review of contracts with Russian parties, including an examination of Russian contract parties and their beneficial owners;

–          Determination whether the sanctions apply and prohibit contract performance;

–          Advice regarding potential liability to contract parties and the US Department of the Treasury,

–          Advice regarding notification of termination of contracts and the disposition of deposits;

–          Advice about possible defenses against liability such as justified non-performance due to force majeure circumstances and regulatory prohibition.

Marks & Sokolov, LLC has extensive experience representing multinational clients in the United States and Russia.  For more information please contact, in the United States:  Bruce Marks (marks@mslegal.com) or Thomas Sullivan (tsullivan@mslegal.com) at (215) 569-8901; or in Russia, Sergey Sokolov (ssokolov@mslegal.com) or Derek Bloom (dbloom@mslegal.com) at +7-495-626-0606.

Executive orders

Crimea crisis gives U.S law firms pause

Crimea crisis gives U.S law firms pause

BSM

“In times of crisis, there is always opportunity,” said Bruce Marks, whose law firm,
Marks & Sokolov, has offices in Philadelphia and Moscow. ED HILLE / File Photograph
Chris Mondics, Inquirer Staff Writer
Posted: Friday, March 21, 2014, 1:08 AM

Like the multinational companies they represent, American lawyers in Russia are collectively holding their breath.

U.S. law firms, including major players in the Philadelphia market, have moved into Russia in a big way, drawn by multibillion-dollar energy deals and expansion into the region by multinationals seeking to feed the insatiable Russian appetite for American-made consumer goods.

But Russia’s lightning-swift occupation of Crimea has revived questions about the safety of investments, and some have put projects on hold. Lawyers with substantial commercial practices in Russia say the concern is twofold: the threat of ever-tightening Western economic sanctions could set off tit-for-tat retaliatory actions, effectively shutting down commerce between Russia and the West – and opportunities for U.S. companies. Continue reading

Section 1782 Discovery: Risks Of Proceedings Ex Parte

Section 1782(a) of Title 28 of the United States Code (“§1782”) allows litigants and tribunals from outside the United States to request assistance in obtaining documentary and testimonial evidence from sources within the United States.  It is common for federal district courts to grant applications for this type of discovery, ex parte.  The reasoning behind this is that “respondent’s due process rights are not violated because he can later challenge any discovery request by moving to quash pursuant to Federal Rule of Civil Procedure 45(c)(3).”  Gushlak v. Gushlak, 486 Fed. Appx. 215, 217 (2nd. Cir. 2012).  See, e.g.,  Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., 2014 U.S. App. LEXIS 531 (11th Cir., January 10, 2014)(affirming denial of motion to vacate Section 1782 discovery order granted ex parte.)

However, in another context, the Supreme Court has warned that ex parte proceedings, “untrammeled by the safeguards of a public adversary judicial proceeding, afford too ready opportunities for unhappy consequences to prospective defendants . . . .” United States v. Minker, 350 U.S. 179, 188 (1956). Given this potential for injustice, counsel for parties seeking ex parte relief must therefore be particularly attentive to their role as an “officer of the court, and, like the court itself, an instrument of agency to advance the ends of justice.” Mallard v. U.S. Dist. Ct. for the So. Dist. of Iowa, 490 U.S. 296, 313 n.4, (1989) (Stevens. J., dissenting) (citation omitted).

Further, under the American Bar Association’s Model Rules of Professional Conduct, as adopted in various forms by 49 states with the notable exception of California, Rule 3.3 requires an ex parte applicant to fully inform the court regarding adverse facts and legal authority:

(a) A lawyer shall not knowingly:

(2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or

(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.

Consequently, in an ex parte proceeding, if counsel for an applicant fails to fully inform the court of all relevant and adverse factual and legal issues, in the event the adverse party or target of discovery brings a motion to set aside the discovery order or quash the subpoena, the applicant and its counsel may be vulnerable to collateral attack based upon lack of candor and/or ethical violations, which of course, may significantly influence the court’s discretion permitting discovery.  Further, counsel runs the risk of incurring sanctions or censure.  For example, in In Re GFL Advantage Fund, Ltd., 2003 Phila. Ct. Common Pl. LEXIS 33 (2003), proceeding under state law, counsel did not fulfill its obligations under RPC 3.3(d) and the court revoked an ex parte order granting discovery ordering return of all documents and censuring counsel.   See also Pa. Environmental Defense Foundation v. U.S. Dept. of the Navy, 1995 U.S. Dist. LEXIS 1461 (E.D. Pa. 1995) (Robreno, J.) (Sanctioning attorney, noting “Even beyond the requirements of Rule 3.3(d), an attorney, as an officer of the Court, has an overarching duty of candor to the Court”).

Marks & Sokolov, LLC has extensive experience representing multinational clients in the United States and abroad.  For more information on Section 1782 discovery in the United States, please contact:  Thomas Sullivan at (215) 569-8901 or tsullivan@mslegal.com.

Russia And Ukraine: What Employers Need To Know And Do During Times Of Crisis

March 18, 2014

Marks & Sokolov presented the webinar on the current political circumstances in the Ukraine and Russia, and how organizations with operations, employees and/or business relationships may be affected during times of crisis. The discussion  emphasized employment relationships, rights and obligations; issues regarding visas, safety and ongoing management; and an overview of commercial issues of which companies should be aware when problems arise.

The webinar featured 106  attendees and the following speakers:

Derek Bloom is a partner with Marks & Sokolov’s Moscow office. Derek is a member of the District of Columbia Bar Association. He practices in the areas of foreign investment in Russia, commercial real estate investments by Russian and foreign investors; secured financing and financial leasing in Russia; and business aviation.

Artem Saprykin is Of Counsel with Marks & Sokolov’s Kyiv office, specializing in commercial, real estate and litigation matters.

Bill Wright is a partner with Fisher & Phillips in its Philadelphia office, the co-chair of the firm’s International Employment Practice Group, a member of the International Employers Forum’s Board of Directors and an active participant in the International Pension and Employee Benefits Lawyers Association.

View Presentation Materials

Top Ten Things to Consider Before you Engage a Foreign Law Expert

Expert reports on foreign law are put together with a goal to educate the court with regard to the substances of a foreign law the tribunal is not familiar with. The judge can call upon experts to evaluate a certain fact or action from the point of view of foreign law, in order to obtain a complete knowledge on the fact or action being judging. That said, it is more often that a party to the litigation sponsors an expert work in order to support that party’s claims.

The reports state facts, discuss details, explain reasoning, and justify the expert’s conclusions and opinions. An expert’s duty remains to “educate” and assist the court. This duty overrides any obligation to the instructing party, regardless of whether he is being paid for his services.

The necessity of rebuttal expert reports sets a higher plank as far as the expert work. In these cases an expert involve in a battle of opinions on points of a controversy in a legal case. The results of the expert reports are then compared and evaluated by court.

A party’s lawyer is usually to recommend an expert based on prior experience, by reference to matters such as areas of expertise, professional and academic qualifications and level of prior success of the litigations, where the expert’s report and testimony were involved.

The top thing to consider when involving a foreign law expert:

1. Review Foreign Expert Profile

2. Review Court Filed Resume

3. Review Foreign legal directories

4. Review prior expert reports and relevant court flings

5. Check court rulings to see if the expert was persuasive

6. Read transcripts of courtroom testimony

7. See how the testimony survived challenges

8. Review caselaw

9. Look far beyond the expert’s resume

10. Meet with your expert in person

Marks & Sokolov attorneys have engaged in assisting experts in preparation of reports on foreign law, including Russian, Ukrainian, and law of other CIS countries. The expert reports were submitted in the UK and US courts, as well as in international arbitrations in Stockholm, Zurich, Cyprus and other countries. Marks & Sokolov also provided expert report on US law in arbitrazh court of Russia.

For more information on expert reports on Russian law please contact Maria Grechishkina mgrechishkina@mslegal.com

Things to Know About Recognition and Enforcement of Foreign Country Judgments In the United States

Winning parties to non-U.S. litigation matters often look to sources in the United States to satisfy their judgments.  American courts will generally accept a judgment obtained in a foreign judicial proceeding as binding and permit enforcement.

The first thing a foreign judgment holder needs to know is that the United States is not a party to any international convention governing the recognition and enforcement of foreign money judgments.  Rather the United States has chosen to stand apart from other countries that have reciprocally agreed to recognize each other’s judgments such as in the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters among EC member states, the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters among EC and EFTA member states and the Inter-American Convention on the Extraterritorial Validity of Foreign Judgments and Arbitral Awards among OAS member states.

However, in the absence of any international agreement, American courts have traditionally been quite liberal in recognizing and enforcing foreign judgments under state law.  To accomplish this, a legal action is commenced in either a federal or state court based upon the applicable provisions of the version of the Uniform Foreign-Country Money Judgments Recognition Act adopted by the state in which that court sits.  In order to succeed, the foreign country judgment holder must show the judgment is conclusive, final and enforceable in the country of origin. However, judgments on taxes, fines or criminal-like penalties and judgments relating to child support or spousal alimony will not be enforced.  A foreign-country judgment will not be recognized if it comes from a court system that is not impartial, lacks due process, had no personal jurisdiction over the defendant or lacked subject matter jurisdiction.  Additionally, an American court may deny recognition if the defendant received no notice of the proceeding or the claim is repugnant to American public policy.

Generally though, if the judgment meets the statutory standards, the court will recognize it and the judgment may be enforced.  Execution on the judgment may then proceed, which means the judgment holder may proceed against the property of the judgment debtor to satisfy the judgment amount.  Because dollar denominated international wires must clear through banks in the United States, it is often possible to trace a judgment debtor’s financial transfers and locate recoverable assets.

Marks & Sokolov, LLC has extensive experience representing multinational clients in the United States and abroad.  For more information on enforcement of foreign country money judgments in the United States, please contact:  Bruce Marks marks@mslegal.com and Thomas Sullivan tsullivan@mslegal.com.